Blackstone bids for IL&FS realty fund assets

Mumbai: Private equity giant Blackstone Group is bidding to acquire the early real estate investments of IL&FS in a deal worth $200 million, or Rs 1,300 crore, after the latter started a process to exit management of these assets, people directly familiar with the matter said.

IL&FS Investment Managers started making real estate private equity deals from a $525-million fund beginning 2006. It subsequently raised $895 million second fund taking the real estate AUM closer to $1.5 billion. Now, IL&FS has mandated JLL to advise on the assert sale as the life of the first fund comes to a close.

When contacted, IL&FS and Blackstone declined to comment on speculation.

Incidentally, Blackstone's secondary private equity unit, Strategic Partners, owns 23% interest in the IL&FS fund, though the current offer is being fielded by the India real estate team. In private equity parlance, secondaries refer to buying and selling of existing investor commitments to new funds. The IL&FS fund had struck 17 investments across residential, commercial and retail asset classes and monetized six out of them. The deal-making would involve transfer of the management rights of the remaining assets with a current portfolio value of just under $200 million to the acquirer.

In May this year, TOI reported that Blackstone was acquiring the $150 million Urban Infrastructure Opportunities Fund, founded by Jai Corp chairman Anand Jain, also a close friend of RIL chairman Mukesh Ambani. The latest moves by Blackstone, the most influential real estate investor globally, carries the potential to trigger secondaries market for real estate investments that are stuck. TOI had reported in the same edition that several other fund managers, including IL&FS, would tap the secondaries market to liquidate early realty investments.

IL&FS and other asset managers saw the attractiveness of their real estate investments, made during the boom years of last decade, nosedive following the financial crisis and market crash in 2008. Sources cited earlier said Blackstone, as an asset manager, sees upside potential in developing or simply unwinding some of these troubled investments.

Blackstone is on acquisition mode at a time when investor sentiment over residential projects has been lukewarm. In the past, Blackstone stepped up momentum in India's commercial real estate, and office space in particular, when it attracted little investor attention.